Seeking to strengthen its position in eastern Ohio, Park National Corp. this week announced its intent to acquire First-Knox Banc Corp. in Mount Vernon for $111.9 million in stock.
The combination would boost the assets of Newark-based Park National 37% to $2.1 billion and expand its franchise into four counties farther north of Columbus.
"The geographic fit is a natural and we feel our larger size will make us better able to compete with the regional banks," said Jerry Nethers, a Park National spokesman.
Park National, which has 39 branches in 11 central and southeastern Ohio counties, is making the acquisition to keep abreast of the competition, bankers and analysts said. First-Knox has 12 branches and $561 million in assets.
Analysts said the deal price, 2.3 times book value, is reasonable given the dearth of other suitable merger targets in the region. The merger is expected to close in the second quarter next year.
"There's not much in the area," said Michael Burton, a banking analyst for the Ohio Co., Columbus. "Because of that, they had to pay up a bit more."
But analysts were confident that Park National could make the deal pay off in short order. First, the bank said the merger will result in expense reductions of more than 12%. Analysts also were confident that Park National could make First-Knox's operations more profitable.
As of Sept. 30, Park National had a 1.8% return on assets and 19.7% return on equity; First-Knox's figures were 1.20% and 13.4%.
One analyst said the move may have been spurred by neighboring BancFirst Ohio Corp.'s acquisition of County Savings Bank. That deal, completed in August, doubled the Zanesville banking company's asset size to $1 billion. BancFirst had held merger talks with First-Knox last year, according to its interim chief executive, David Arnold.
Mr. Arnold brushed aside suggestions that his company scared Park National into making a deal. But he expressed no doubts that the Newark bank's acquisition of First-Knox would make eastern Ohio a tougher market.
"Long term, as we both seek new revenue streams, the fact they have enhanced their size means they will be an even more formidable competitor than they are today," Mr. Arnold said.